Argentine leader defaults on $132 billion debt

December 24, 2001|By Patrice M. Jones, Tribune foreign correspondent.

BUENOS AIRES — Argentina's new interim president announced immediately after taking office Sunday that he would suspend payments on the nation's crippling $132 billion debt, the largest national debt default in history.

Adolfo Rodriguez Saa, a 54-year-old former governor from the now-ruling Peronist party, was sworn in Sunday after a tumultuous week of deadly looting and demonstrations that culminated in the resignation of President Fernando de la Rua.

Saa, whose mandate lasts about 60 days until elections are held, nonetheless laid out an ambitious economic stimulus program that he said would give food to the needy and ease Argentina's economic crisis by providing jobs in part with money that would have serviced the national debt.

The new president confirmed what many analysts had suspected for months. Many had predicted Argentina would renege on its debt payments--at least temporarily--in the midst of a four-year recession that has pushed the nation near bankruptcy.

But Saa also seemed to indicate that Argentina may soon make further departures from de la Rua's orthodox economic program.

The charismatic leader, who had been governor of the central province of San Luis until Sunday, struck a populist tone in his inauguration address.

Saa told the crowd that he would sell the government's cars and the presidential jet. He elicited cheers when he lashed out at de la Rua, saying the last administration had punished people by putting the interests of foreign creditors first.

"They gave priority to the payment of ... the foreign debt over the payment of the debt to its own people," he said to shouts of "Argentina! Argentina!"

The new president seemed to cast himself in the mold of the old-style, working-class movement founded by the legendary Juan Peron in the 1940s.

Saa could run in the elections scheduled for March 3, and he appeared to be setting out a long-range plan Sunday that could take him into a bruising race with several higher-profile figures in the Peronist party.

The election was called to choose a leader to serve out the two years of de la Rua's unfinished 4-year term.

During his speech Sunday, Saa ruled out a feared devaluation of Argentina's currency and said he had no plan to promote "dollarization," which would phase out the peso for the U.S. dollar.

The new president said he would set up a fund for victims of the recent riots that killed more than 25 people late last week. He also promised to pare down the government and cap wages of top public officials.

His final announcement, plans to introduce a new currency to "inject liquidity" into the economy, was criticized by some as essentially a mandate to print money.

Some Wall Street bond rating agencies had already declared Argentina essentially in a debt default since November, when de la Rua's government asked investors to swap government bonds at high interest rates for new ones at lower rates.

Analysts say that while the default means Argentina could be shut out of foreign investment for years--perhaps facing further economic privation and more violence--world markets had anticipated the move, so the effect on other economies may not be severe.